Cost Mgt.- involves process in creating a
Planning- setting of goals, identifying
dynamic & competitive environment.
PURPOSE: to give emphasis to long term
measures NOT JUST TO SURVIVE, but to SCORE
A GOAL.
Strategy- set of policies, procedures &
approaches that produces long-term success.
SCM- involves development of cost
management to facilitate long term success.
FUNCTIONS OF COST MANAGEMENT
1. Strategic Mgt.- competitive advantage
= continued success & involves
identifying & implementation of goals.
2. Planning & Decision Making- involves
budgeting, profit planning, and cash
flow mgt.
3. Mgt. & Operational Control- who
manages who?
4. Reportorial & Compliance to legal
requirements- responsibility, require
compliance to regulatory services. (SEC
& BIR)
Cost Management Accountants- concerned
with providing info. to people inside the org.
who has direct control on the operations of
business.
Analytical reports- frequent update, business
opportunity, & specific problems.
TYPES OF MANAGEMENT ACCOUNTANT
1. Scorekeeping- data accumulation
2. Attention directing- interpretation and
report of information
3. Problem Solving
MEANS/PROCESS TO ATTAIN THE MGT. GOAL
1.
alternatives
2. Controlling- involves evaluation of
manager’s performance & the
operation itself.
3. Decision-Making- it involves
determination of predictive info.
One of the advantage of using variable costing
is it meets the management control objectives
by showing separately the costs traceable and
controllable.
A basic tenet of direct costing is that Period cost
should be currently expensed. What is the
rationale behind this procedure?
Period costs will occur whether or not
production occurs and so it is improper to
allocate these costs to production and defer a
current cost of doing business.
The inventory under absorption costing carries
with it portion of the prior period's fixed
overhead.
When sales exceeded production, the net
income reported under variable costing is
higher than under absorption costing.
Last year, Mandonar Company had an income
of 800,000 using absorption costing. Beginning
and ending inventories were 3,000 and 7,000
units respectively. If the fixed
manufacturing cost per unit is 55. What was the
income using variable costing? 580,000
Variable costing is also known as direct costing
Under conventional costing, the unit product
cost is: 17
Absorption Costing- treats direct manufacturing
costs and manufacturing overhead cost, both
variable and fixed, as inventoriable costs.

Net income using variable costing is not

affected by the level of changes in inventory
because all fixed costs are deducted on the
period they occur.

The reconciliation of net income using

absorption costing can be determined by adding
the decrease in inventory units multiplied by
FMOH/unit.

COST ASSOCIATED WITH DECISION MAKING

1. Relevant Cost- expected future which

either between decision alternatives
2. Differential Cost- cost that will be
increased/decreased as a result of
decision
3. Avoidable Cost- can be eliminated as a
result of choosing one alternative.
GENERAL RULE: ALL COST ARE
AVOIDABLE, EXCEPT:
1. Sunk Cost/Historical
2. Other Unavoidable Cost
4. Opportunity Cost- benefit
forgone/highest income sacrificed when
an option is chosen over another.
5. Out of pocket Cost- costs required for
immediate/near future cash outlay.

AVOIDABLE- /- variable X- fixed (or if the prob.

says)

ALL VARIABLE COST ARE RELEVANT